Malat v. Riddell

Malat (plaintiff) and joint venture partners bought land intending to develop it for rental, but after encountering zoning difficulties, they ended the venture and sold the parcel instead, with Malat reporting the proceeds as capital gains. Riddell (defendant), the tax official, argued the venturers actually had a dual purpose from the start - developing for rental or selling, whichever proved more profitable - meaning the land was held primarily for sale in the ordinary course of business and the proceeds should be taxed as ordinary income; the district court and court of appeals agreed with Riddell, and the Supreme Court granted certiorari.